Metinvest steel output rose 16% qoq in 3Q21

Ukraine’s largest steelmaker Metinvest (METINV)
reported on Nov. 3 a 16% qoq increase in steel production at its subsidiaries
to 2.575 mmt in 3Q21. Azovstal’s output lost 7% qoq to 1.106 mmt in 3Q21, while
Ilyich Steel’s output added 4% qoq in 3Q21 to 1.084 mmt, according to the
holding’s quarterly operational update.

 

Steel output at Dnipro Coke, which became a steel
producer in August as a result of its acquisition of Dniprovskyy Steel assets,
was 385 kt in 3Q21.

 

Year-on-year, Metinvest’s 9M21 crude steel output
added 13% to 6.933 mmt.

 

The holding’s hot iron output in 3Q21, 2.651 mmt, rose
18% qoq, and the 9M21 volume was up 11% yoy to 7.056 mmt.

 

The 3Q21 output of semi-finished products at Metinvest
surged 48% qoq to 1,015 kt as the consolidation of billet production at Dnipro
Coke from August added 165 kt in 3Q21. Also, its pig iron output jumped 36% qoq
to 396 kt while its merchant slab output added 15% qoq to 454 kt.

 

The holding’s finished product output inched up 2% qoq
in 3Q21 to 1.863 mmt due to a 44% qoq jump in long product output to 338 kt,
also as a result of the acquisition of Dniprovskyy Steel assets. Its hot-rolled
coil production added 8% qoq to 603 kt, while output of hot-rolled plate
dropped 11% qoq to 695 kt.

 

For 9M21, Metinvest’s output of semi-finished products
slid 1% yoy to 2.466 mmt while its finished product output jumped 23% yoy to
5.345 mmt.

 

Total coke production lost 9% qoq to 1.094 mmt in
3Q21, while merchant coke output dropped 15% qoq to 400 kt. Raw material
shortages were mentioned in the update as one of the reasons for the qoq drop
in total coke production volumes in 3Q21. For 9M21, total coke production
decreased 3% yoy to 3.461 mmt, while merchant coke output dropped 8% yoy to
1.391 mmt.

 

Total 3Q21 iron ore concentrate production lost 3% qoq
to 7.814 mmt, whereas output of merchant iron ore products plunged 25% qoq to
3.712 mmt due to a 26% qoq drop in merchant iron ore concentrate production to
2.444 mmt and a 21% decrease in merchant pellet production to 1.268 mmt. The
decrease in merchant iron ore product output was likely due to the increase in
the intragroup consumption due to the consolidation of Dniprovskyy Steel assets
starting from August (these assets were external customers before their
acquisition by Metinvest).

 

Total 9M21 iron ore concentrate production rose 4% yoy
to 23.678 mmt, whereas output of merchant iron ore products dropped 6% yoy to
13.468 mmt.

 

Production of coking coal concentrate at Metinvest plunged
21% qoq to 1,351 kt in 3Q21 due to unfavorable geological conditions
experienced by Pokrovske Coal, according to the release. In 9M21, coking coal
concentrate output jumped 80% yoy to 4.055 mmt due to the consolidation of
Pokrovske coal business from March.

 

Dmytro Khoroshun: Metinvest’s
steel production volumes might suffer in 4Q21 due to coking coal shortages, in
part due to the low output at Pokrovske Coal.

 

Indeed, steel production at Metinvest’s two Mariupol
plants, Azovstal and Ilyich Steel, dropped 2% qoq in 3Q21, we calculate, and we
do not exclude a further drop in 4Q21.

 

Nevertheless, it is possible that Pokrovske Coal will boost its production volumes already in October,
which will be positive for Metinvest.

 

We maintain our neutral view on METINV bonds.